Economic growth and thinking outside the box

This column in The Economist leaves me feeling extremely uncomfortable because it speaks for all those economists (and others) who are in denial about the reasons  for the economic crisis and the need for thinking outside the conventional economic box to deal with it.

For some time The Economist has been saying the economic crisis must and can only be solved with more growth.  And the way to attain economic growth is innovation and increasing productivity.  This column claims aging workers become less productive than younger workers and the aging workforce dooms us to decreasing rather than increasing productivity.

clownIf only older workers could increase their productivity then all our problems would be solved.

Another article in the same issue talks about the economic crisis around the world.  I find it a bit of a stretch to think that all these problems are a result of an aging workforce in the rich world countries.

One has to observe that in the last few years the marginal cost of a lot of energy and mineral resources has gone up.  This means the most easily extracted of these resources have now been used.  What is left will require more energy to extract.  This has to have a negative impact on our economy.   It could even mean that future growth will be difficult if not impossible.

This is a much more serious issue than what most people can admit.  Rather than asking people to work harder and to use  Google glasses we need to look for ways to organize our economy so that our welfare does not depend upon continued economic growth.

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

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Bashing Paul Krugman

I’ve been having difficulty coming up with an idea for a post but one can always fall back to bashing Paul Krugman.  While it’s fair game to disagree with someone I prefer not to put him down. I can’t resist this one.  The guy generates so many words he must have a DBS degree.  (The D stands for doctor.)

There are four areas of disagreement.

First, the stimulus and money creation policies he promotes  were what was needed in the 1930s but are probably not right for current circumstances.  Both of these have been tried and appear not to be working.

Second, if the underlying problem is with the resource base, then increasing economic activity is going to make things worse and possibly bring forward the date of a major economic collapse.

My third concern is that even if we have the resources to prepare for an alien invasion, is that really what we want to do with our time and resources. There are so many things to do in arts, music, crafts and social fields that some of us would find more rewarding.  Also I think each individual  should decide for him/herself what to do rather than have to do what some economist decrees.

A fourth concern is that inflation which he also promotes is a form of theft.

On the other hand Krugman does have some uses.  He gives us something to think about and he has helped me come up with a post for this weblog.

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

In denial about the economic crisis

How do you communicate with people who are in denial.

The question was raised while reading this article that suggests a lot of Greek people believe they will never leave the Euro zone.

The question also applies to a lot of economists, most of the world’s seven billion people and politicians  –  although politicians have an excuse.  They won’t be reelected if they try to tell people they will have to accept a lower standard of living.

The economic  crisis is not just a Greek or European problem, it is a world-wide problem.  The rest of us will probably have our turn soon.

I believe there are things we could do to reduce the impact but so long as so many people are in denial, there is little hope.

Money creation problems on YouTube

It’s great to see a criticism of how we create money getting a good airing on YouTube. (Here)

Victoria Grant is a 12-year old young lady who speaks with a great deal of confidence on a subject about which most people know nothing.  It is hardly surprising that she got a standing ovation for her explanation of how the banks and government are defrauding Canadians.

She clearly has  a good understanding of the problems with our money creation mechanisms but her proposed solution would probably be an even greater ripoff.

She got it right on when she said “under the present system all money is debt” and when she points out debt is enslavement.  I would take issue with her suggestion that money issued by the banks if fake while money issued by the Bank of Canada is real.  It is probably good that both are money “generated out of thin air” as the alternative, a commodity money, has its own problems.

Her concern is that the Canadian government is defrauding us by borrowing money from the banks and paying commercial interest rates. I would be more concerned that the government will never be ale to repay its debts with the same purchasing power as it borrowed.

Miss Grant’s solution is for the government to borrow directly from the Bank of Canada rather than the commercial banks and use the money for economic infrastructure..  This is quantitative easing and would increase the money supply.  It would work only if there are available lots of physical resources for infrastructure and that is not clear.

If the increased money supply is not matched by an increase in the goods and services produced, the result would probably be inflation.

Inflation is a more subtle and more efficient way for governments to steal from their people.  Any one with financial assets in fixed prices or with pensions would lose purchasing power.  I’m not sure Miss Grant would want that.

However, she should be lauded for pointing out some problems with our banks and money supply and for getting a lot people to think about them.

More stimulus spending: This time it will be different

Today’s Economist has  a report on an article arguing in favor of more economic stimulus.

In this article we have a couple of high-ranking economists arguing that under current circumstances stimulus spending will be self-financing in that it will bring in higher tax revenues.  This time it will be different.

This sounds like the frustration of drowning people who don’t know what is happening to them.

I have a theory that economists were the theologians of the twentieth century.  Their debates were as relevant as the medieval debate over how many angels could dance on the head of a pin. Their role was to provide legitimacy to our economic activity during the golden years of prosperity and to our excessive use  of resources.

Now that we are having to deal with the consequences of our using up the most accessible resources, they don’t have a clue as to what to do.

If you are in the water over your head and you want to survive you should at least try to tread water.  Treading water in the ocean of economics will  require some major changes in economic thinking.

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